Supply

1
Supply Demandin Action

• Chapter 5 Section 2

2
Objectives

• Why do people wait in long lines to buy tickets
  for some concerts?
  
• Why does a house cost more in Denver than in Fort
  Wayne, but a candy bar cost the same in both
  cities?
  
• Why does it cost more to go to the movies on
  Friday night than on Tuesday afternoon?
  
• What does traffic congestion have to do with
  supply and demand?
  
• What does trying out for a high school sport have
  to do with supply and demand?
  
• What is the necessary condition to earn a high
  income?

3
Saturday Night Performance

• Suppose some actors from New York City come here
  to perform a play on Saturday night.
  
• Tickets 75 each

4

• There is a long line of people waiting to buy
  tickets.
  
• Some people are not able to get tickets.
• Was the 75 price for a ticket
• too high,
• too low, or
• just right?
• Why?

5

• The long line of people in which some of the
  people are not able to buy a ticket is evidence
  of what?
  
• SHORTAGE
• A SHORTAGE occurs when the price is above or
  below equilibrium?
  
• BELOW the equilibrium price

6
Supply
P
PE
75
Demand
Q
SHORTAGE
7
P
Supply
SURPLUS
A
B
SHORTAGE
Demand
Q
8
One Price Theory

• A good will sell for the same price no matter
  where it is sold.
  
• This excludes..
• transportation costs
• non-movable goods
• (such as a house)

9
Denver
Fort Wayne
P
S
S
S
P
S
D
D
Q
Q
10
At the Movies
S Seats
P
F
7.50
T
D Friday
5.50
D Tuesday
Q
11
On the Highway
S Lanes
P
T
1.50
D 1100 PM
D 800 AM
Shortage
Q Highway Space
12
On the Highway
What if we add lanes?
S Lanes
S Lanes
P
T
1.50
D 1100 PM
D 800 AM
Shortage
Q Highway Space
13
On the Highway
What if we car pool at 800 AM?
S Lanes
P
T
1.50
D 1100 PM
D 800 AM
Shortage
Q Highway Space
14
Trying Out for High School Sports
S Positions on Team
Non- Cost (Skill Dev, Practice Time, Performa
nce)
L
C
D Big School
D Small School
Q Students
15
Assessment

• Why do people wait in long lines to buy tickets
  for some concerts?
  
• Why does a house cost more in Denver than in Fort
  Wayne, but a candy bar cost the same in both
  cities?
  
• Why does it cost more to go to the movies on
  Friday night than on Tuesday afternoon?
  
• What does traffic congestion have to do with
  supply and demand?
  
• What does trying out for a high school sport have
  to do with supply and demand?
  
• What is the necessary condition to earn a high
  income?